Federal Lawsuits Filed Over Liquor Permits

BENTONVILLE — A lawsuit brought by Bentonville resident Robert McCurry against the state’s Alcoholic Beverage Control Division in federal court questions the constitutionality of state liquor laws.

McCurry’s lawyer filed the lawsuit Aug. 21 in U.S. District Court in Little Rock after McCurry’s application for a retail liquor permit was denied by the alcohol agency’s board on July 16. The board’s decision was based on McCurry’s ownership of stock in Gild Corp. and Gild Holdings, companies associated with the Missouri-based liquor chain Macadoodles. State law prohibits anyone from holding an interest in more than one liquor permit in the state. Macadoodles has a franchise liquor store in Springdale.

“The Board finds that the application for a retail liquor permit filed by Robert W. McCurry may not be granted by the Board as it finds that Mr. McCurry, by his own admission, holds an interest in another liquor permit in the State of Arkansas,” the board wrote in its denial letter to McCurry.

AT A GLANCE

Liquor Laws

Laws in question in the McCurry lawsuit are:

Arkansas Code 3-4-205(b)(1)(A): “No retail liquor permit shall be issued, either as a new or replacement of an existing permit, to any person, firm or corporation if the person, firm of corporation has any interest in another retail liquor permit, regardless of the degree of interest.”

Arkansas Code 3-4-205(b)(1)(B): “A retail liquor permit shall apply only to one location, and a person, firm or corporation shall not be permitted to receive any direct or indirect financial benefit from the sale of liquor at any location other than the permitted location.”

Source: Arkansas Law

State law prohibits liquor permit holders from owning any stock in publicly traded companies like Walmart and Walgreens, both of which have retail liquor permits in Arkansas, according to the lawsuit. Through the three days of hearings in July to award liquor permits in Benton County, applicants were not asked if they owned stock in Walmart or Walgreens. Only McCurry, Sarah Gildehaus and Timothy Harrell were asked if they owned stock in Gild Holdings or Gild Corp.

As the law is written, it “substantially interferes” with interstate commerce by restricting the trade of publicly traded companies, according to the lawsuit. The law violates the Securities Act of 1993 and the Securities Exchange Act of 1934 that protect stock trading, according to the complaint.

McCurry’s lawyer, Jim Lyons of Jonesboro, said this week the law would restrict stock ownership of companies like Jack Daniels and others that distribute liquor, as well as companies like Walmart that have liquor permits. It also could apply to pension funds or retirement accounts if the holder has a portfolio that contains Walmart or Walgreens stock, according to the lawsuit.

The law also fails to define terms like “person, firm or corporation” and “direct or indirect financial benefit,” creating an unconstitutionally vague law, according to the lawsuit. Lyons said the law could apply to distributors who deliver to more than one liquor store or janitors that clean liquor stores.

The lawsuit cites additional issues, such as the right to franchise, that were raised in a lawsuit filed in federal court by Steven Cherry and Gild Holdings in May. State law interferes with interstate commerce and restricts the federal right to have and operate franchise in the state, according to those lawsuits. Cherry applied for a retail liquor permit, but was denied a hearing after the state alcohol agency determined his store would be a Macadoodles franchise location.

The law doesn’t violate the commerce clause because it treats state corporations the same as out-of-state corporations, according to a motion to dismiss filed by agency attorneys. It counters the vagueness argument stating the language conveys sufficient warning when measured by “common understanding and practice.”

The judge has not yet ruled on the motion to dismiss. A proposed trial date of June 16 is set for the Cherry lawsuit. No date has been set for the McCurry complaint.

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